The dollar index (DXY00) is little changed. The dollar is seeing safe-haven demand due to today’s stock market sell-off. However, the dollar is being undercut by today’s -1.4 bp decline in the 10-year T-note yield, which undercuts the dollar’s interest rate differentials.
The dollar has underlying safe-haven support from Middle East tensions as concerns continue about Houthi attacks on Saudi Arabia and speculation about whether the US will launch a new military attack on Iran after Tuesday’s (Nov 3) US election. The Wall Street Journal reported Thursday that a top US commander has briefed President Trump on his military options.
EUR/USD (^EURUSD) is down -0.36%. The euro is trading lower despite today’s stronger-than-expected Eurozone GDP report.
Eurozone Q3 GDP rose +0.4% q/q and +1.3% y/y, stronger than market expectations of +0.2% m/m and +1.1% y/y.
ECB Governing Council member and Bank of Italy Governor Fabio Panetta said the ECB may have to deliver more interest rate hikes to contain inflation. He said, “With inflation set to remain above target for an extended period and risks skewed to the upside, further increases in the policy rates could prove necessary.”
The ECB at its meeting Thursday left its deposit rate unchanged at 2.50%, as the market expected. The markets are now pricing in an 81% chance of a +25 bp rate hike at the ECB’s next policy meeting on December 17.
USD/JPY (^USDJPY) is down -0.34%. The yen is seeing strength today on the sharp US stock market sell-off, which could spark yen repatriation demand from Japanese investors.
The Bank of Japan left its policy rate unchanged at its meeting today, as the market expected. However, comments from BOJ Governor Kazuo Ueda supported market expectations for a BOJ rate hike in December. The market is pricing in an 81% chance of a +25 bp BOJ rate hike at its next meeting on December 18.
December COMEX gold (GCZ26) is down -116.6 (-2.89%), and December COMEX silver (SIZ26) is down -3.060 (-5.84%).
Once again, gold is failing to see safe-haven demand and is trading lower as a sell-off in stocks and crypto raises concerns that investors will need to lighten up on precious metals positions to cover losses in other markets.
Gold has underlying support from the -1.4 bp decline in the 10-year T-note yield.
Gold has underlying safe-haven support from Middle East tensions, with persistent attacks by the Houthis on Saudi targets and speculation about a possible new US military attack on Iran after next Tuesday’s US election.
Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 4.25-year high last Wednesday, although those holdings have since backed off. Long holdings in silver ETFs rose to a 7.5-month high on Thursday.
Strong central bank demand for gold is supporting gold prices, after recent news showed that bullion held in China's PBOC reserves rose by 740,000 ounces to 77.47 million troy ounces in September, the largest increase in three years and the twenty-third consecutive month the PBOC boosted its gold reserves. However, Russia’s central bank, the sixth-largest central-bank gold holder, said on October 20 that it reduced its gold reserves to a 7-year low of 72.8 million ounces as of October 1.
On the date of publication, Rich Asplund did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.